Franchise Brokers

What is a Franchise Broker?

A franchise broker is a person who helps sell or offer franchises on behalf of a franchisor and receives a fee or other compensation for doing so. Franchise brokers may use titles such as “franchise consultant,” “coach,” “broker network,” or “franchise sales organization,” but they perform the same basic function: connecting prospective franchisees with franchisors.

The goal of this page is to increase transparency in the franchise sales process and help prospective franchisees better understand the role, services, and compensation of franchise brokers.

Registration Requirements (Not Yet Operational)

The law requires most franchise brokers doing business in California to register with the Department of Financial Protection and Innovation (DFPI). However, these registration requirements cannot begin until the Legislature makes a budget appropriation for this program. Registration will become operational one year after the appropriation is made.

Until that time, the DFPI cannot accept franchise broker registration filings.

The sections of the law not related to registration are already in effect.

What Franchise Brokers Must Do Once Registration Is Active

After funding is approved and registration begins; franchise brokers will be required to:

• Register Annually
• Disclose certain background information, including business ownership, professional experience, and any recent legal actions to prospective franchisees.
• Disclose how they are compensated and what services they provide.
• Keep books and records of franchise offers for at least five years.

The DFPI will also have the authority to issue stop orders or suspend a broker’s registration if they fail to comply with the law.

Read the frequently asked questions and answers (FAQ).